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Shari’A Supervisory Board And Islamic Banks’ Insolvency Risk

Author

Listed:
  • Umar Habibu Umar

    (Universiti Brunei Darussalam, Brunei Darussalam)

  • Muhamad Abduh

    (Universiti Brunei Darussalam, Brunei Darussalam)

  • Mohd Hairul Azrin Besar

    (Universiti Brunei Darussalam, Brunei Darussalam)

Abstract

This study examines how the characteristics and quality of Shari’a supervisory board (SSB) influence the insolvency risk of Islamic banks. It employs unbalanced panel data of 43 Islamic banks in 15 countries between 2010 and 2020, which are hand-collected from the banks’ annual reports. The results indicate that the SSB quality index, SSB Islamic finance professional expertise and SSB competency increase insolvency risk while the SSB members with PhDs reduce it. Meanwhile, SSB size, SSB meetings, SSB gender diversity (SSBG) and SSB members from foreign countries have no significant influence on the insolvency risk. These findings have implications for policymakers and regulators in carving policies and regulations in restraining the SSB from taking excessive risk. They can also guide the Islamic banks’ board of directors and shareholders in appointing the SSB members.

Suggested Citation

  • Umar Habibu Umar & Muhamad Abduh & Mohd Hairul Azrin Besar, 2023. "Shari’A Supervisory Board And Islamic Banks’ Insolvency Risk," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 9(3), pages 419-442, September.
    • Handle: RePEc:idn:jimfjn:v:9:y:2023:i:3c:p:419-442
    DOI: https://doi.org/10.21098/jimf.v9i3.1635
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    More about this item

    Keywords

    Risk-taking; Shari’a supervisory board (SSB); SSB quality index; SSB characteristics; Islamic banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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